Russian Woes Deepen as Reserves, Employment, and Retail Sales Fall
Strengthening US Dollar Moderates Growth as Russian Woes Deepen (Part 3 of 3)
Russian “woes” deepen
The Russia-tracking Market Vectors Russia ETF (RSX) has lost more than 30% over the last six months. Investors in the Russian economy have been quite wary of their holdings amid the various economic issues that the country’s combating.
W – Western sanctions
O – oil price decline
E – economic slowdown (growth contraction, surging inflation rate, and declining employment)
S – sliding ruble
What’s driving Russia down?
Russian “woes” started with the West imposing a sanction on Russia, targeting trade and investment flows that have severely affected growth in the country. The oil price decline added to the economic slowdown affecting the oil and natural gas industry’s revenues. Taxes from these companies account for about 50% of the economy’s budget revenues. Oil companies Open Joint Stock Company Rosneft Oil Company (OJSCY), Open Joint Stock Company Gazprom (OGZPY), and Open Joint Stock Company Oil Company LUKOIL (LUKOY) have lost about 32%, 36%, and 17%, respectively, over the last six months.
The Russian ruble has been declining against the US dollar (UUP) on account of the flight of capital from the country and loss of investor confidence in the economy’s prospects.
Russia reels under depleting reserves, rising unemployment, and plummeting retail sales
Data released by the Central Bank of Russia and the Federal State Statistics Service on March 19 indicate that the country’s foreign exchange and gold reserves have depleted further. Retail sales have plummeted as consumer confidence is shaken by the sliding ruble and inflation runs rampant. Russia’s gold and forex reserves declined to $351.7 billion in March from the $360.2 billion reported in February. Retail sales decreased by 7.7% in February year-over-year versus the 4.5% decline in January.
The unemployment rate also increased to 5.8% in February from January’s 5.5%, adding to Russian households’ misery.
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